Now it's tax and don't spend

The Treasury's coffers received a record-breaking boost in July as the proceeds of the mobile phone licence auction continued to flow in.

Tax revenues outstripped spending by £8bn last month - the biggest July figure since monthly data started in 1984-85, according to the office for national statistics.

So far this financial year, the government is running a massive £19.4bn surplus on the cash measure of its financial position, compared with a £63m deficit in the corresponding period a year ago.

The healthy state of the books is partly a result of windfall gains from the auction of third generation mobile phone licences, set to net £22.5bn in total for the Treasury. July is also usually a good month for corporation tax receipts.

On the government's preferred measure of the fiscal position, which smooths out lumpy spending and revenue items, the Treasury also recorded a record surplus of £6.6bn in July, giving a surplus for the year so far of £2.33bn, compared to a deficit of £332m a year ago.

Many analysts believe that the chancellor will once again achieve a bigger surplus for the whole year than the Treasury forecast in the March Budget. Mr Brown's forecasts have consistently been on the pessimistic side.

"Inland revenue and customs and excise receipts are overshooting projections by a large margin," said Adam Cole, UK economist at HSBC. "The outcome for the year as a whole is likely to be at least £5bn better than the Treasury's forecasts suggest."

On the spending side, the long awaited surge in departmental spending has yet to materialise. The ONS figures showed that net departmental outlays totalled £23.2bn last month, down from £24.3bn in June. For the year to date, spending is running at £95bn, up from £90.4bn in the same period a year ago.

While the Treasury is storing away a comfortable surplus, consumers appear to be tightening their belts and reining in borrowing as well. New figures from the British Bankers' Association showed that consumer borrowing rose by just £2.6bn, the lowest figure since February. Mortgage lending was also subdued, rising by an underlying £1.9bn, the smallest rise for five months, and one which chimes with other recent evidence that the housing market is slowing down.

The BBA's director-general, Tim Sweeney, said: "Mortgage lending appears to be cooling off after several months of very strong growth."

Separate figures from the Council for Mortgage Lenders, covering building societies as well as banks, showed that first-time borrowers are being priced out of the market. First-time buyers accounted for 43% of purchases in the three months to July, down from 46% in the three months to May.